Virgin Money defended its choice to sell its shares exclusively to institutional investors – as revealed yesterday in City A. M. – arguing it made for a smoother flotation.
Small investors have missed the chance to invest in the majority of IPOs over the past year – the last very large float with a retail element was the Royal Mail sale, which gave huge returns to investors very quickly.
Virgin Money is keen to emphasise its strong reputation with consumers, traditionally a factor boosting demand for shares among retail investors.
But chief executive Jayne-Anne Gadhia said the priority was a simpler sale to big buyers. “For the financial strategy it seems sensible to look at institutional investors for the first £150m to make sure it is handled well,” Gadhia said.
“When the shares are trading on the open market, customers will have an opportunity to buy them then.”
However, she indicated future share sales could include retail investors, once the stock was trading openly.
“We have no philosophical objection to a retail offering, so who knows in the future,” Gadhia said.
But fund managers were unhappy that their retail clients would miss out on the IPO.
“It is disappointing that Virgin have chosen to exclude private investors, particularly given the ubiquity of its brand,” said Richard Hunter from Hargreaves Lansdown.
And Panmure Gordon’s David Buik was also critical. “I think this bank has received questionable advice to only offer shares to wholesale investors rather than include retail as well,” he said.
“It makes potentially for an uncomfortable share register.”
WHO OWNS THIS BANK?
■ The biggest stake is held by Richard Branson’s Virgin Financial Investments, with a 46.5 per cent holding.
■ Next up is Wilbur Ross’ investment fund which owns a 44.9 per cent stake.
■ If the bank achieves a £2bn valuation, that puts those stakes at near £1bn each.
■ Meanwhile, the staff are receiving stakes worth £1,000 each, a total of £2.3m.
BEHIND THE DEAL
GOLDMAN SACHS | ANTHONY GUTMAN
1 Gutman began in the City as a corporate lawyer for Freshfields, before working his way up through Citigroup and Goldman.
2 He has been a big star in the IPO market this year, working on some of the biggest floats including B&M’s and Upper Crust-owner SSP’s IPO, which gave the firm a valuations of £1bn.
Barclays is a bookrunner on this deal, and its team includes Chris Madderson who worked on the One Savings Bank float. Bank of America Merrill Lynch and Citigroup also have teams working on the IPO.